Is The 3-6 Month Emergency Fund Rule Wrong?
Вставка
- Опубліковано 9 лют 2025
- "Don't miss FlexiSpot Anniversary sale now and a chance to win free order.🌟Use '24AUG30' for extra $30 off on E7, E7 Pro, E7L! and you can get a combo discount on their C7 chair with the desk purchase.
FlexiSpot E7 Pro standing desk:
bit.ly/3AqinZS -US
bit.ly/3AjA7pG -Canada"
Blog post about not having an emergency fund: earlyretiremen...
Check Out My Recommendations (It helps support the channel):
🔥 M1 FINANCE Investing- Free $10 (once you deposit at least $100 within 30 days) bit.ly/427KBBn
📚 Here's a video on how to use M1 Finance • M1 Finance Investing T...
📝 NewRetirement - The retirement planning tool I personally use to make sure I'm on track with saving for retirement. It's perfect for "Do it yourself" investors bit.ly/3EAAhrJ
🔒 AURA - 14 day free trial to see if your personal information has been leaked online and have it removed aura.com/jarrad
📝 Empower - Free Net Worth Tracker bit.ly/3NUNtwq
📖 Free copy of my Spending Review Spreadsheet: bit.ly/48lMVZ1
💬 Sign up for 1 on 1 coaching with me: bit.ly/4bAUpYT
📧 Business Inquiries: JarradMorrowYT@gmail.com
An emergency fund is a financial safety net that you set aside to cover unexpected expenses or financial emergencies. The idea behind an emergency fund is to provide you with a cushion to handle unforeseen events without having to rely on credit cards, loans, or other forms of debt that could strain your finances.
Purpose: 1. Unexpected Expenses: These could include medical bills, car repairs, home repairs, or sudden job loss. 2. Financial Security: Having an emergency fund ensures that you have money available to cover your needs without disrupting your long-term financial goals or investments.
Size of the Fund: 1. Rule of Thumb: Most financial experts recommend having enough in your emergency fund to cover three to six months’ worth of living expenses. This includes rent or mortgage payments, utilities, groceries, insurance, and any other necessary costs. The number of months you hold could vary a lot depending on your particular circumstances. 2. Tailored to You: The exact amount depends on your individual situation, such as job stability, number of dependents, and overall financial situation. Some people may feel more comfortable with a larger fund, especially if their income is unpredictable.
Building the Fund: 1. Start Small: If saving three to six months’ worth of expenses seems overwhelming, start by setting smaller, achievable goals, like saving $1,000 first, then building from there. 2. Regular Contributions: Make regular contributions to your emergency fund, treating it like any other financial obligation. Automating transfers to your emergency fund can help make this process easier.
When to Use It: Genuine Emergencies Only: Use your emergency fund only for true emergencies, not for non-essential purchases or expenses. If you dip into your fund, make it a priority to replenish it as soon as possible.
Affiliate Disclaimer: Some of the above may be affiliate links. Support the channel by signing up or purchasing through those links at no additional cost to you. I appreciate you for helping me keep this channel running.
Disclaimer: This video is for entertainment purposes only. Everyone's situation is different so do your own research before making any decisions with your money.
I bought my house when i was single. I managed to save 3 months of emergency funds. 2yrs after moving into my house. I was diagnosed with cancer. The year after the diagnosis, as i was going back to the Dr's and hospital to check for any remaining cancer cells. New management came in and I was let go. Luckily i had that money put away for my monthly expenses. Once i was cleared. I found another job. I decided to put money away in case something like this happen again. I managed to save for 7 months of emergency fund. Take it from me. You never know what life is going to throw at you.
Thanks for sharing your experience. Happy to hear you were able to beat the cancer!
pretty amazing .
Way to go champ.....I will take your words to heart
If feasible you should have a 12 month E fund ... yeah I know crazy ... but that's me ... I want to make sure I am absolutely prepared for the worse case scenario.
I have a 6 month emergency fund but I also have separate buckets for home maintenance, car maintenance, health insurance deductible, etc. Some of that is for pre planned expenses like car insurance renewals but I also use it as a primary emergency fund before dipping into my actual emergency fund. Like a buffer to the buffer. Probably an extra ten grand between them all on top of my emergency fund.
Thanks for sharing your strategy. How do you handle where each bucket is held? Is it all in one account and you separately track how the whole thing is divided up or do you have different accounts for different buckets? Or do you do something else?
@@JarradMorrowI use SoFi and they have a feature called vaults. This means you can have multiple vaults (buckets) within your one savings account. I really like this feature as I have a vault for medical, dog expenses, future car, emergency fund, and home improvement.
I also do the same thing with Ally. I have a mini emergency fund also working on a 6 month emergency fund. And then I have separate buckets for car maintenance gas food etc.
Great video Jarrad - thorough, as usual. Excellent topic!
In my decades of working, I lean towards 6 months EF. Murphy will show up big!!! Be prepared and ready to fork out $$$. Until then I park money in HYSA.
@@bcusaaus4749 have any kids or wifey? I don't, so I've lowered it.
I'm single and have a 12 month EF. Peace of mind is good and having F.U. money is even better.
@@bdtn342 you could be investing half of that. Sale and transfer takes T+1 now. And if you have margin you get money instantly.
Ive got 3 year emergency fund in a 5.1% CIT savings account
@@lostboi3974 what's the occasion?
I personally have a 1 year emergency fund because it’s *REALLY hard* to find an entry level engineering/coding job. It took me 6 months to find one after I graduated college, so I would have been broke if I wasn’t living with my parents at the time.
Great insight into when it makes sense to hold a larger emergency fund. Thanks for sharing to give us all a little more perspective 👍🏻
This is why I say I don't need an emergency fund at what's recommended. I'm retired military so I don't worry about healthcare, steady income, etc. On top of this my wife is a Federal Employee and besides an act of Congress, she's not losing her job. Thankfully, we're in though situation because of the career decisions we made decades ago!
@@roburb73 I seriously don't see a downside in military and federal service; you can always hop out to a private sector whenever you feel like, and you could come back in later with commensurate GS grade and step. You get comprehensive benefits, if a bit limited, but then you get to come across guys and gals big into finances like Ramsey. Oh and PCSing is encouraged if you don't want to retire a GS-7
@@ffnovice7 There's not much downside to a Federal career, I agree on that. There's some downside to the military career depending on how it all plays out.
My wife is a GS-13, so she's excelling and will push for a -15 spot before she's done in 9 years. She's going to retire at 50. I'm a retired E-9 and have been working in the private sector since I retired 7 years ago. I only work because the money is to good to sit at home. My healthcare is free with the VA, but I used Tricare for the family.
Most people freak when I tell them I don't have an EF. I get that if you don't know my situation. However, I honestly don't need one with my retirement package and my wife's job. There's nothing that could come up that we can't cover with one pay period.
@roburb73 thanks for serving our country 👍🏻
@@JarradMorrow Thank you! It was the best 26+ years of my life!
I'm federal and sleep well at night, wife is a teacher and had job security as well. We are never gonna be a millionaire in a year, but over time we will and we can sleep well not worried about job cuts.
Most medical offices offer a discount if you pay the total amount right away. You just have to ask. We've saved as much as 25% when we asked for the cash discount.
Great tip. I tried this at the front desk and they said there wasn't anything they could do. But that's not going to stop me from calling them up once I get the bill.
@@JarradMorrowask to speak to the business office (patient accounts) manager and ALSO ask if there is charity care program available if that does not work. I am a UM Nurse.
@@wdeemarwdeemar8739 thank you. This billing game is wonked. You have to know the right people with the right ideas to literally save a fortune. I also recommend a personal injury attorney if it's multiple bills over 5k.
I’ve been so conflicted on how much to have in an emergency fund. Right now I’m aiming for 20K.
$30k is what I’m doing 😂
I have a lot , 6 figures
@@kckuc310certainly hope you have your six figures invested and not just sitting in a bank account.
10k LCOL
It depends on your level of comfort. Do you have enough for a deductible? Do you have enough money to pay the bills if you lost your job today? Do you have enough money for an emergency repair?
Medical costs are wild, but in most instances they'll either give you discount to pay it all up front or you can get on a 0.00% interest payback plan for like a 1-2 year period. And sometimes even if you're able to fund the whole amount up front now if they'll give you 0.00% and two years to pay it can be in your best interest to put it on a payment plan anyway.
This is true. Just had surgery. My share was a little over $4k ... I have 0% interest payment plan with them to pay it over 2 years. Can I pay it in full now? Yes. Am I going to? no way. They can wait.
@@brett4932 if it's multiple bills and you're hitting high deductible levels (>5000$), it's worth the money to hire a Personal Injury Attorney. My bills were reduced from well over 10 grand down to 4.
When I had surgery a couple years ago and had a huge deductible, the hospital offered either a 0% interest for a year or a 25% discount for prepay. The latter clearly beat that money earning 5% in my HYSA.
@@k5sss wow, that's a pretty hefty discount. Good stuff. A great example of what a little negotiation can do. Thank you for sharing!
My number is 5 years all expenses included
Got it never going back
My budget is made up of two values for every category: normal and minimal. The normal spending is what I usually spend any given month. The minimal is in the case of job loss or need for cash flow (the cases where the emergency fund is needed).
With that, I base my emergency fund on the minimal (way less eating out and entertainment) and I have a dull year of expenses. This is way overkill, but it's not a crazy amount of cash and it makes me feel very comfortable knowing I can focus on finding a good job given aome job loss.
I wouldn't expect to ever go more than a few months unemployed based on my industry, but this is the middle ground for getting rid of any paranoia haha.
@@maxcohn3228 I think customizing to personal values (literally) is the best path to engage the issue of emergency funds. You'll never forget it because of how much you invested into it
I agree about that income shock lol
I’m done building up an emergency fund for 2 years. Now to focus on Roth IRA / fun money and fun me
Nice work. It’s rarely acknowledged how long it can take to build up a fully funded emergency fund so congrats on sticking with it 👍🏻
If you weren't investing to save up... You messed up.
@@Username_CC_ ambiguous syntax
Heal those arms! I'm not sure if I watch for the financial advice or to look at your arms! lol. Thanks for the great content!
Awesome thoughts. I'm starting a CAR FUND this month as well. It would be cool to see how you strategize a 1 - to 3-year fund.
@@hogue3666 what percentage of your net worth will you pay for your next car? Mine is ⅒, for a Tesla MYLR22, when my NW is 10× the contemporaneous price.
In the past he said he uses a low expense ratio S&P stock fund for car savings.
Need advice!
So I use my credit card as a debit card essentially just so I can accumulate points but always pay it off within like a day or week at most but it has a $14,500 limit that will almost certainly be available in the event an emergency arises.
With that being said, would it be feasible to invest my 10k emergency fund that’s currently sitting in a “high yield” savings account into a low risk stock portfolio?
In the event of an emergency I could have that money in my account within probably a week if needed and any emergency that needed cash on hand I could just use that credit card and of course immediately pay it off once the funds hit my account. Thoughts? Pros? Cons? Thanks!
CD laddering is a good option for an emergency fund.
@@geoffgordon9569 penalties
I looked at that, but CD rates just aren’t enough better than HYSA rates to justify the money not actually being available for emergencies, at least without forfeiting the interest and/or paying penalties.
@k5sss Do whatever makes you feel safe.
Great video. I have been worried less about keeping 3-6 months in a savings account. With 30k in our HSA now and a good amount in our brokerage accounts, we feel comfortable that we could use theses buckets as a source for an emergency.
@@TrumptasticDays based username. I'm also using a 💳, brokerage accounts, and fully funded tax vehicles as my emergency funds.
Off track, but how do I find a red pilled woman, in blue city-states? I moved to a blue city and the red flags make a quilt here
Have you heard of Betterment's Safety Net account (30/70 stock/bond ratio)?
I was thinking of having a 3 month + 30% volatility buffer in there, 3 months in HYSA, and $7500 in my HSA.
@@shaereub4450 repeating digits is always good. We're only human
"Stop saving money!" Give it to a Financial Advisor! Doesn't matter which one as this a PSA to give money to the financial advising industry! 😆😅🤣😂
I once thought that way, but as I approach retirement age, I've come to accept that I'm no expert on finances, taxes, and the market. My FA is. Knowing someone with substantial skill and knowledge is keeping track of my investments is comforting. Yes, he gets a percentage, but the percentage I pay him is well worth it. The money he's made for me greatly exceeds the percentage I pay him. The more he makes for ME, the more he gets, so it's in his best interest to earn me excellent returns on my investments.
I have 2 months efund just doing my best to save even more my target is around 1 year to be honest
Another fine video. Your desk is way too clean. :)
Appreciate it. Having clutter all over the place doesn't make me feel good so I try to stay on top of keeping things in order. It definitely gets a little out of hand from time to time but I'm pretty good at not letting it go on for too long.
@@JarradMorrow cleanliness is godliness
-t. Bill Cosby
@ffnovice7 Quoting Bill Cosby. Bold move 🤣
@@JarradMorrow terveiset!
Idk anyone who don’t need an emergency fund
That medical bill negotiation is surely not going to work now that you posted proof that you have the cash to pay it...good luck!
Spending less than you earn is un-American 🙂
@@BadPhD777 imagine believing this meme
I started using my credit card and brokerage as my emergency fund
Edit: it required an adjustment period and was rough moving from a town of 60k to a city of 3M. In election season. Oh and my mother retired and moved in with me. And my dad will after the fires. All 3 of us in a 1bedroom. Also I may be shadow muted
How has it worked in action so far? Have you had to use that method for an emergency yet?
@@JarradMorrow bro you opened the bottle 🍾 and I appreciate you direct replying: tl;dr I agree with the emergency fund in principle but I'm deviating right now.
I had tried the Ramsey step of keeping 3 months', then 6 months' worth of expenses in either a checking account or a HYSA since Corona. We all felt, at that time, that emergencies were just on the horizon, no shame in that feel. However I never had the need to use the 5 figure emergency fund (except that one time but it was still 2k) and realized I may have been wasting time and gains by not investing almost all of it, all this time.
I came across a Reddit post from a spook in the DMV area who is living out my goal: federally pensioned, high-3 done with from the DC locality, has land in a much cheaper rural area. He says he never felt the need for a liquid emergency fund in an ACH account, because for anything he'd use a credit card first and sell off some of this matured stocks within a month to cover those costs.
His HDHP has a 6k HD, which I personally know takes years to haggle using a PIA, thus doesn't need to be paid immediately, only copay. Lastly, he has a bugout bag (BOB) with cash, rounds, and a couple 🔫s just in case a disaster strikes - I myself was in Harvey, so the need is real.
So I've emulated, and keep just enough for bills in my basic bitch checking/savings. I have been trying this redline, extreme finance mindset out, 5 weeks into having moved from a (red) town of 65k, to a metro area of 3M, and it literally sucks. My net pay is only +67 $/pp, despite a gross annual +8k. The taxes jumped up 23%. And food here is either expensive, or inedible. Oh, sidebar: your *_Gotta_* make a video on the 2026 sunset tax brackets.
That 2k emergency was when my parents filed chapter 7 bankruptcy earlier this year, and I literally went broke (sorta) by zeroing out my bank account paying for their attorney fees; I had been maxing out my HSA and Roth TSP out of my paycheck from January to May, and had been living off that $myriad emergency fund all that time. It could not have been timed more terribly to reduce me to zero; it was kinda freeing, believe it or not. That was the biggest urgent, immediate emergency I've had to pay for. You can see where I'm coming from with being obsessed with personal finance now; this was a long, lifetime coming.
I think Ramsey is mostly correct on the full emergency fund for many of his demographic: young parents, literal 50-50 split of married or divorced, who have more than one mouth to feed, and thus need a full, conservatively estimated emergency fund.
I think we all, individually need to get to that point, to know what it feels like to be fully secure, and if you're a struggling bachelor like me, you have the 🏍️ opportunity to exhaust that emergency fund just to see what it's like.
Ah, and now my parents need me to call them about their personal loan debt to a pastor's wife who borrowed from the church till to loan to my parents. I'm down another grand a month until end of CY24. I won't go into the philosophy of when to cut off family and such right here (I already did 4 years ago on deployment), but just wanted to provide a human insight (on the extreme end) on what is a possible route to entertain. Wish me luck with Soxl, bro
Same. Liquidating a stock on robinhood is just as quick as a withdrawal from a savings account. But I'm only doing that if I can't float the expense on my credit card of course. Been doing this for a couple years now and haven't had to sell a stock yet.
@@young-king301 I was disappointed with Robinhood in 2020 but maybe they and Ameritrade got better. I like Schwab for their clean UI and slightly longer timeout period. Fidelity allowed me to buy fractional, 3x Bull LETF so they made up for their mistakes earlier
@@JarradMorrow am I shadow muted from yt?
You’re exactly the kind of guy I’d expect to change “Tom, Dick, and Harry” to “Tom, Rick, and Harry”
Haha I had to because I didn't want UA-cam to flag the video as inappropriate. Gotta play it a little safe or else the video will reach less people.
Wow.. if you are this o.c.d. over fear... i feel sorry for you. I am blessed to be in a trade union that takes care of the loss of income scenario. It is not optional... Just keep a H.E.L.O.C. open and chill out, and live life.. If you end up w some debt that the interest is higher than your returns on investments... then adjust... chill out people.